Zero-ed Out GRATs And the ETIPZero-ed Out GRATs And the ETIP

Deborah V. Dunn, partner, and Mary L. Kaczmarek, associate, Kirkland & Ellis LLP, Chicago

Under Internal Revenue Code Section 2642(f)(1), the grantor of a trust cannot effectively allocate generation-skipping transfer (GST) tax exemption to property transferred until the close of the estate tax inclusion period (ETIP). The ETIP is the period of time after a transfer during which the value of the property transferred would be includible in the transferor's gross estate (other than by reason of IRC Section 2035, which brings certain transfers within three years of death back into the taxable estate) if the transferor died.¹ A transfer of property to a grantor retained annuity trust (GRAT), for example, is subject to the ETIP rule because, a...